Nitin Pai: Don't Overburden the Gig Economy—It Offers Millions of Indians Their First Job
Nitin Pai argues that labour regulations often create more jobs for inspectors while employers replace labour with capital, urging caution in regulating the gig economy.
The Public Debate on Gig Work Conditions
The recent public debate has focused on the tough working conditions and sharp management practices in the delivery-platform industry. Personal anecdotes and reports highlight how gig workers earn just enough to eke out a living despite long hours. One major platform rebutted this with data showing gig workers made a net income of around ₹21,000 in a typical work-month, with delivery times optimized by increasing store density rather than incentivizing risky riding. Following government intervention, platforms have stopped promising 10-minute delivery.
Unfortunately, the anecdotal and emotional framing of the debate does a disservice to its cause. Government intervention is not the answer, as we are still untangling labour laws that hinder manufacturing employment. Labour regulations tend to create more jobs for labour inspectors while employers replace labour with capital, so we must be careful what we wish for.
Public Interest in the Gig Economy: Three Key Issues
There are three big issues in the public interest: raising income levels, smoothening income volatility, and addressing negative externalities. None of these call for imposing regulations on gig economy platforms but rather implementing public policies that benefit everyone.
Raising Income Levels Through Skill Development
A recent study by Achyuta Adhvaryu and colleagues shows that Indian gig workers in 2024 were better off than their Indonesian and Kenyan counterparts, working fewer hours at higher efficiency levels for better pay. ₹27,000 per month for 58 hours of work per week is a decent starting pay for someone with basic education. For wages to rise, labour productivity must increase, meaning workers must learn new skills. Adhvaryu's research indicates high churn, with around 50% of drivers earning more after leaving the platform, often moving into full-time employment.
The good news is that gig work serves as the first rung of the employment ladder. The Indian economy must create higher rungs and equip workers to climb them.
Smoothening Income Volatility and Expanding Opportunities
Income flow can be volatile in the gig economy, but this sector acts as a financial safety net. The study shows one in three drivers across countries relies on platform work during emergencies or slow periods. Expanding the gig economy from home delivery to domestic services is desirable, giving workers more choice. State governments should foster innovation and growth in this sector.
New forms of social security are needed for the gig economy. Imposing cesses for a welfare fund, as some governments have done, is insufficient. A multi-contributor social security system, involving governments, employers, customers, CSR, and philanthropic funds, is possible with India's financial inclusion. Gig worker unions can organize low-cost group insurance options, alongside improvements in public health, education, and food security schemes available to migrants and local residents.
Addressing Negative Externalities Like Road Safety
Negative externalities, such as risky driving, are a concern. Anupam Manur argues this is mostly availability bias: bad driving is common, but delivery riders are easily identifiable. Delivery persons may be unfairly maligned, but their behaviour affects road safety. Adhvaryu reports 82% of Indian gig workers had valid licences, compared to 90% in Kenya and 97% in Indonesia. The use of registration-free electric bikes makes it hard to trace and punish offenders.
Fixing these externalities requires cooperation among platforms, law enforcement, local civic leaders, and consumers. For example, a local leader in Bengaluru constructed public toilets due to the large number of taxi drivers resting in the area.
Transforming Indian Lives Through Gig Work
Any successful business model attracts both admiration and criticism, some over the top. India's gig economy platforms have transformed how Indians buy, eat, and use services. They enable a high-school-educated person anywhere in India with a phone and bank account to take a train to Bengaluru, rent an electric scooter, and start earning an honest wage from day one. They show that honest, hard-working people have a decent chance of making a life for themselves.
Without the gig economy, politicians and well-meaning people might be advocating for an urban employment guarantee scheme. The author is co-founder and director of The Takshashila Institution, an independent centre for research and education in public policy.
